EXXONMOBIL’S fifth project at the Uaru-Mako field is expected to be the largest yet in Guyana with a proposed development cost of US$12.7 billion (GY$2.6 trillion), according to the Environmental Impact Assessment (EIA) compiled by Acorn International and released this month.
The Uaru-Mako field is estimated to hold over 1.3 billion barrels of oil and could produce as much as 263,000 barrels per day.
The EIA process is modelled after similar regulations used in the United States and other countries. It requires impact assessments for projects that explore any theoretically possible environmental impacts, explores how impacts can be mitigated and offers public-engagement opportunities to give citizens more power over decisions that will impact them. This is crucial for Guyanese to have an input in the future of the oil-and-gas industry.
EIAs done in Guyana are done in accordance with international best practices and allow for a transparent analysis of the environmental consequences in decision-making. Generally, the critical stages of an EIA include screening to decide whether a proposed project should be subject to EIA, scoping to identify important impacts and issues that need to be addressed for the study, the actual EIA study and preparation of the report, and finally the presentation of findings to the public.
The EIA also contains critical environmental data that can help put minds at ease. Despite public concerns about fisheries, the expert analysis found that impacts were likely to be limited to areas within 100 metres of offshore production vessels—a vanishingly small part of the 26,800-square kilometre Stabroek Block.
The Uaru-Mako project, initially estimated to cost some US$10 billion, is now expected to exceed that sum due to inflationary pressures in the economy, because of the Russian invasion of Ukraine and the COVID-19 pandemic.
John Rielly, Chief Financial Officer at Hess Corporation, revealed during their third quarter earnings call, that the development will break even, despite the inflationary pressures.
“The Uaru project is going to have industry-leading returns and a low cost of supply; the cost of the Uaru project, will be higher, reflecting the current market conditions as well as additional scope to reduce greenhouse gas emissions,” Rielly said.
While front-end engineering and design (FEED) work for the Uaru-Mako project is already underway and first oil is targeted for the end of 2026, more work remains to be done before ExxonMobil Guyana and its partners reach final investment decision (FID), due to ongoing evaluations of the new cost considerations during the development process.
It is important to note that although the increased costs were unexpected, the people and Government of Guyana will not be expected to cover these costs. ExxonMobil and its partners will continue to provide the capital needed to develop the offshore resources.
These cost pressures on the project are not unique to Guyana and are being felt on oil-and-gas projects across the globe.
Guyana continues to be in a unique position as the Guyana-Suriname Basin has one of the most competitive break-even points in the world, according to a report from Rystad Energy. This means that although costs to develop are increasing, Guyana will still see significant wealth due to its 50 per cent share of all profits. Guyana already has more than US$1.4 billion in its Natural Resource Fund.
The Uaru-Mako development project would be a sizeable investment in Guyana that will see approximately 38-63 development wells, installation and operation of subsea umbilicals, risers, and flowlines (SURF) equipment; installation and operation of a floating production, storage, and offloading (FPSO) vessel; and eventually, project decommissioning.
Not only is all this critical infrastructure being put in place, but this project will also see an oil- production rate of 250,000 barrels of oil per day (bpd) and upper oil-production limit of around 263,000 bpd. That would significantly increase Guyana’s revenues and continue its path into the upper ranks of oil producers.
Importantly, the Acorn International EIA study also highlighted that the project will be producing 540 million standard cubic feet of gas per day, which could help power the electric grid and develop other industries. The project will also require up to 540 new employees to drill and complete the development wells.
The fifth and largest project to date is yet another sign that Guyana remains on the right path to develop its resources, while protecting the environment.